Gold & Silver To Hit New Highs: Rich Dad Poor Dad Author

Editor's Note: Introducing Kitco News' Invest Like The Experts Series, a weekly feature that will showcase investment gurus' top investment picks for the coming year. Each expert was asked how they would invest $10,000 in 2014 and what they would absolutely avoid. Click here for more experts!

Expert: Robert Kiyosaki

Claim to Fame: Author of Best-Seller Rich Dad Poor Dad

What type of investor do you consider yourself?

I am, first and foremost, an investor who looks for cash flow over capital gains. In the best scenarios, I am investing for both: cash flow and capital gains. I would also say that I invest as an entrepreneur. This means I am not a gambler. I want control over the investment. My desire for control means that I rarely invest in the stock market, bond market, or other traditional investment markets.

As an entrepreneur, I invest as a partner with another entrepreneur. I know the CEO personally, because he is my partner. I can call him (or her) at anytime because we are friends as well as partners. In most stock investments, I cannot do this. I recently invested in three oil wells. I invested as a 10% partner. That means I put up 10% of the money and receive 10% of the cash flow, or profits. As a partner, I also receive the tax breaks that partners receive. In the oil industry, I receive a 30% tax break on my initial investment and a 15% depletion allowance. Tax breaks, or incentives are another form of cash flow, or indirect income. If I invested in stocks, let’s say shares of Exxon, I would not share in tax breaks or cash flow. Most financial planners would say this is risky—and it is, if you do not have good partners.

Finding good partners is the key to success in anything, in business, in marriage and, especially, in investing. In simple terms, if I invest in stocks I invest in numbers of shares. When I invest as a partner, I invest for percentages of the business or the venture. The same is true when I invest in real estate or other business startups. I want to invest as a partner, not a shareholder. I want some control over the business. Most shareholders have little if any control over the companies in which they own stock, even if they own a million shares. In general, being a “traditional” investor is less risky, but it also comes with fewer rewards.

How would you invest $10,000 in 2014?
I am asked this question a lot, usually related to what I’d suggest for someone else. This may be my most frequently asked question (“I have $10,000… what should I invest in?”) and it always frustrates me because I can’t possibly know enough about someone’s financial life to offer prescriptive advice on how should invest—or not invest. The Rich Dad teachings and philosophies related to investing are grounded in financial education. Learn about different investment vehicles and asset classes and become your own best advisor in terms of the best place or places to put your money…and once you’ve gained the knowledge (and some experience) you can make confident, informed choices about what’s best for you. That said, and looking ahead to 2014, this is how I would allocate my investment dollars:

Equities

5%

Real Estates

40%

Precious Metals

25%

Oil

20 %

Cash

10 %

With gold and silver prices heading down, I would be acquiring a larger position in physical gold and silver. When the stock market goes down, panic will set in, and gold and silver are likely to hit new highs.

Where would you avoid putting your money in 2014?

I would definitely avoid paper assets such as stocks, bonds, mutual funds, and ETFs and the reason is these are paper assets, not real assets. Think of the story of the Three Little Pigs: The first pig built his house out of straw, the second pig built his house out of sticks, and the third pig built his house out of bricks. Here’s my spin on that story: The first pig represents the poor. Poor people build their house out of paper. They work hard for cash and save cash. Their strategy is to work hard, live below their means, and save money. When the big bad wolf appears, huffing and puffing, these pigs are wolf food. The second pig represents the middle class. They build their houses out of illusions, believing in job security, benefits, owning their home, saving money, and investing in a retirement plan filled with stocks, bonds, mutual funds, and ETFs.
When the big bad wolf, also known as the Next Recession or New Depression, hits sometime between 2015 and 2035, these pigs will also be food for the wolf. The third pig builds his house out of tangible assets. These pigs are entrepreneurs and professional investors who study and invest for their own future, investing in real assets, not paper assets. When the big bad wolf comes, in that 20-year window between 2015 and 2035, those who have built houses of “bricks” are likely to get richer.

They become richer because they built with bricks, investing in tangible assets such as real estate, gold, silver, oil, food, and businesses they control. Rather than save cash, they save gold and silver. If you must invest in paper, learn to be an options trader. Then you will know how to make money whether the markets are going up or down.

I am very concerned about the millions of baby boomers who are counting on the stock market to deliver them a safe, sound, long retirement. I am afraid the baby boomers who are counting on the stock market are in trouble. When the big bad wolf blows on their portfolios made of paper, chances are the wolf will have a feast. I would rather be building a house of ‘bricks—gold, silver, oil, food, and businesses…tangible assets—not paper.’

What is the best investment advice you ever received?

In 1973, I returned from Vietnam where I served as a pilot in the Marine Corps. My poor dad recommended I go back to school get my MBA, possibly my PhD. My rich dad recommended I take a seminar on real estate. I took the advice of both my Dads. But after I completed my 3-day real estate seminar, I dropped out of the MBA program. It didn’t take me long to realized that my rich dad’s advice was the best advice for me. If I were planning to climb a corporate ladder, the MBA program would have been best for me. But since I was planning on becoming an entrepreneur and an investor, my rich dad’s advice was best for me.

The reason my rich dad suggested I take a real estate course was because I needed to learn how to use debt, rather than my own money, to acquire wealth.

In 1971, President Nixon had taken the U.S. dollar off the gold standard. This meant the dollar was now backed by debt, by U.S. bonds. That is why rich dad suggested I learn to use debt, and why he suggested I learn to invest in real estate.

Learning how to invest using debt, rather than my own money, is the best advice I ever received. Today when I hear people complain, “How can I invest, I don’t have any money,” I know they do not understand the power of debt.

Who do you follow for investment advice?

This is a great question, and a very important question. In my opinion, it’s very important for people to seek out the best teachers and advisors. If you have bad teachers and poor advisors, your life will be one of pain and struggle. Think of it this way: If you go to a bad doctor, your health will suffer. If you get bad financial advice, your wealth will suffer.

My best advice comes from Rich Dad advisors, experts in their fields and my personal advisors. They all have Rich Dad Advisor books because they really are my advisors. A few of them are:
Ken McElroy is my partner in real estate and author of Rich Dad Advisor book The ABCs of Real Estate Investing. Blair Singer is a long time friend and my go-to advisor on team building and sales training. Blair’s books (Sales Dogs and Team Code of Honor) are vitally important books for entrepreneurs, because all entrepreneurs must sell. When Blair trains the Rich Dad sales teams, sales go up and so does income. Tom Wheelwright is a CPA and my advisor on taxes. His Rich Dad Advisor book is Tax-Free Wealth. Since taxes are our single largest expense, Tom’s advice is priceless. He has saved me millions, legally, with strategies and knowledge that have meant paying less and less in taxes. Andy Tanner is a Rich Dad advisor on paper assets. His Rich Dad Advisor book is Stock Market Cash Flow.

Other people I follow are: Jim Rogers, author of Hot Commodities; Richard Duncan, author of The Dollar Crisis; Bert Dohmen, editor of The Wellington Letter; Jim Rickards, author of Currency Wars; Richard Russell, editor of Down Theory Letters; and Chris Martenson, author of The Crash Course and there are many more.

These people are essential for my financial future. Finding advisors who are best for you could be the most important thing you can do today.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.